Federal Reserve Symposium Disappoints Markets

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US Dollar

It was a quiet few days all round last week as Janet Yellen’s speech at the Jackson Hole Symposium approached on Friday. Investors were expecting a hawkish outlook on US monetary policy, but were severely disappointed after Yellen offered only cautious optimism. She suggested that there was a building case for hiking rates, but made sure to reiterate that future hikes would remain data-dependent. Fed rate hike bets have been brought forward to December, but markets had wanted to hear that September was the ‘live’ event. The US Dollar is advancing today, however, as traders recover from the initial disappointment and focus on end-of-year monetary tightening.

Pound Sterling

Data from the Confederation of British Industry (CBI) gave Pound Sterling a boost on Tuesday after showing industrial orders had recovered by much more than expected. A similar performance by further CBI data on Thursday failed to have the same effect on the markets, however. Friday’s last GDP estimates remained in line with earlier predictions to show strong second-quarter growth. Regardless, like so much of the UK’s pre-Brexit referendum data, markets largely ignored the figures. Consumer confidence figures for August tomorrow are expected to show that sentiment is recovering, which could boost the Pound.


Eurozone PMIs were mixed on Tuesday but ultimately pointed to strong fundamentals in the currency bloc. Markets were more concerned by an unexpected weakening of consumer confidence. As the week progressed markets became more focused on the latest US developments, muting the impact of a surprise fall in German business confidence. Strong German GDP figures did nothing to improve the mood, nor did a small uptick in German consumer confidence. Key German inflation data today could return market attention to the European Central Bank (ECB) and its efforts to stimulate price growth in the Eurozone.

Australian Dollar

Despite incredibly choppy trading, the Australian Dollar remained on an uptrend overall last week, helped by several occasions where investors hunted for yield in the wake of disappointing US data. Consumer confidence experienced a strong rise and markets recovered quickly from a surprisingly accelerated decline in the rate of construction sector output during the second quarter. The fact that government spending on infrastructure leapt up at a double-digit pace suggested a strong quarter of building work ahead, keeping pressure on the Australian Dollar to the upside.

New Zealand Dollar

The only data from the past seven days may not have been supportive, but the New Zealand Dollar still remained stronger in the aftermath of the release. July’s trade balance tumbled much deeper into deficit than had been expected thanks to a bigger drop in the value of exports than forecast. The ‘Kiwi’ was protected from depreciation by credit ratings agency Standard & Poor’s announcing it was upholding its current ratings for the New Zealand banking sector. This ensured New Zealand’s attractiveness to investors seeking a strong return from assets like government bonds remained intact.

Canadian Dollar

Another quiet week for Canadian data left the crude oil markets in control, with crude wavering but ultimately managing to hold position in the middle of its recent price range. Domestically, the Canadian Dollar received some support from the fact that several of Canada’s major banks posted strong profits for the second quarter. The Royal Bank of Canada (RBC) also stated that it had set aside less capital to deal with non-performing loans, suggesting a more confident outlook on the financial health of its debtors. GDP figures for June and the second-quarter are due tomorrow.

Posted by Rewan


Rewan is one of an in-house team of currency analysts working at TorFX, a leading foreign currency broker. In his role Rewan studies the latest currency market movements and writes about the impact of global economics and politics on exchange rates for several online and physical publications.

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